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Editorial: Stats understate unemployment

BY DI EDITORIAL BOARD | NOVEMBER 12, 2013 5:00 AM

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Over the past few years, unemployment has been improving, at a snail’s pace, but improving nonetheless. Trends in the official unemployment rate and other economic indicators seem to support this narrative.

The Bureau of Labor Statistics released the October jobs report last week. The economy picked up 204,000 jobs that month, slightly better than expected. The unemployment rate was 7.3 percent, 4.1 million workers were classified as long-term unemployed, largely unchanged from the previous month.

So what’s new? The economy appears to be trudging along at snail’s pace. Same as usual. Except that when you start parsing out the jobs numbers, the picture that emerges is downright horrible.

There are several different measures of unemployment, and the one that gets the most attention leaves out a whole swath of workers who have given up on trying to find jobs. When factoring in those missing workers, the unemployment rate for October looks a lot less like 7.3 percent and a lot more like 10.8 percent, the Economic Policy Institute reported. Worse yet, according to this metric, the unemployment rate has barely improved since late 2009, when it measured at 11.2 percent.

In the month of October alone, the number of unemployed workers who gave up on looking for work jumped from 5.2 million to 6.1 million. And as if that wasn’t bad enough, the number of workers who’ve given up on finding a new job has been rising steadily, in much the same way that the official unemployment rate has been falling. Through just a few tabulations, the unemployment rate has gone from mediocre to awful.

The implications for businesses, government, and ordinary workers are little short of disastrous.
The Economic Policy Institute explained that most of those unemployed workers were of prime working age (25 to 54). Granted, because that covers a span of nearly 30 years, that is hardly revelatory, but it does highlight that there are a lot of productive workers who aren’t working.

What makes the age of these workers especially problematic is that the older workers tend to have substantially more experience than younger employees, who can be paid less than their more expensive older counterparts.

For businesses, this amounts to lost production at a relatively low price and therefore, lost profits. Government loses potential tax revenue because money isn’t circulating as well as it could be. But workers are hurt the worst, because they lose their main sources of income and thus their means of sustaining themselves.

Obviously, the United States hasn’t dug itself out of the jobs hole created by the recession — not by a long shot. In light of these circumstances, it is surprising and disappointing that the federal government has not been more aggressive in promoting a fiscal policy geared toward encouraging economic growth. In light of the political circumstances, though, it’s almost expected.

That leaves the Federal Reserve to use monetary policy to keep the economy on track. It’s not ideal. Inflation is a real problem that can result if action is too aggressive. But on the other hand, pulling the rug out from beneath the economy isn’t a good alternative.

That massive unemployment has been essentially constant since 2009 is highly disturbing. That lawmakers continue to do little to solve it is even more troubling.


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